Budget writers downplay surplus from tax revenue

Posted: Sunday, December 25, 2005

ATLANTA - After several years of budget-slashing, Republicans are preparing for their first crack at crafting a state spending plan under the rosiest economic outlook since taking over the governor's office and eventually the Legislature.

State tax revenues were up about 8 percent through November, meaning that when lawmakers reconvene on Jan. 9 they should have more money to work with as they decide the state's spending priorities.

But they'll also face state agencies and programs that have seen steep cuts in recent years, and who will be clamoring to get funding restored now that the state's budget situation is no longer so dire.

"Budgets are a lot easier to write when times are lean than when they're fat," said Democratic Sen. George Hooks of Americus, who led the Senate's budget-writing Appropriations committee for 10 years when Democrats controlled the Legislature. "We come under enormous pressure from our constituencies to do this, that and the other thing when revenues are up."

Before his election as Georgia's first Republican governor in generations, former Democratic Sen. Sonny Perdue made a campaign promise to cut pork out of the state budget. However, during the first two years of his term, the state cut more than just any alleged pork. Because Georgia was still feeling the pinch of a nationwide recession that started in 2001, the state was forced to slash spending by as much as $1.7 billion, by some estimates, and dig deep into its "rainy day" reserve fund.

This past January, the budget rebounded enough to boost spending by about $1 billion for the 2005 fiscal year - although about $360 million of that went to pay for a 2 percent raise for state employees and to keep up with enrollment growth in the state's schools, colleges and universities.

Advocates for education, health care and a host of other interests were largely forgiving of Perdue and lawmakers during the tight economic times, saying they believed assurances that the government would like to do more for them, but simply couldn't afford it.

Now, they say, is time for those policy makers to prove it.

"It's showtime," said Tim Callahan, spokesman for the 65,000-member Professional Association of Georgia Educators. "I have heard some educators around the state start to question the commitment this administration has to public education. It's time for them to walk the talk."

Callahan's group wants funding for more school counselors and psychologists, smaller class sizes, more training and a significant pay raise for teachers. The state's other major teachers group, the Georgia Association of Educators, is asking for a 6 percent teacher pay hike, or a slightly smaller one coupled with relief for teachers' health care costs.

Health care advocates are expected to push to restore cuts to PeachCare, the state's health program for the children of low-income families. Under a change last year, children may lose their coverage for three months if their parents are late making their monthly co-payments.

And extra tax money always increases the urge for politicians to stuff local-assistance projects - so-called pork barrel spending - into the budget, especially in an election year. Senate and House budget writers spent the final days of the last session, which ended in March, tussling over about $10 million in projects some called pork.

Both politicians and economists, however, are downplaying the amount of extra spending the Legislature will be able to do this year.

"I don't believe there's going to be a huge surplus," said House Speaker Glenn Richardson, a Republican from Hiram. "We have got to rebuild our reserves because, like it or not, another rainy day is coming."

Richardson said the state's rainy-day fund dwindled from $750 million to roughly $50 million last year. He said the top priority will be restocking that fund, a move endorsed by University of Georgia economist Jeff Humphreys.

That's because Humphreys doesn't expect the rate of revenue growth the state has enjoyed in recent months to continue.

"You'll be hard-pressed to find any economist that would," he said. "I would put the surpluses into the reserve fund - that would be my first move - then I would look to use money to increase the capacity of the state with things like building transportation, improving education and infrastructure."

The state also may be shouldering some unforeseen costs from the fallout of Hurricane Katrina, as the state has helped house and care for many of the estimated 106,000 evacuees who fled to the state. However, the Gulf Coast storm actually may have a positive effect on Georgia's finances in the long term, as convention and tourism, shipping, building and other industries see a boost, Humphrey said.

Besides the impact of Katrina, an increase in the amount that state agencies pay to employees for mileage - prompted when post-Katrina gas prices spiraled - will drain millions of dollars from the budget before any other new spending is considered.

Budget writers in Perdue's office are continuing to craft the governor's budget proposals - which he traditionally unveils to lawmakers early in their session.

Revenues rising

With state tax revenues on the rise, here's several of the ideas being tossed around on what to do with the extra money:

PUT IT IN SAVINGS: Coping with a recession in recent years, the state withdrew a lot of money from it's reserve fund - the equivalent of a savings account. House Speaker Glenn Richardson says the balance of the state's "rainy day" fund dropped from $750 million to $50 million. University of Georgia economist Jeff Humphreys says the state's top priority should be to restore those funds in the account.

PAY TEACHERS MORE: The Georgia Association of Educators is asking that the state's teachers get a 6 percent raise in their annual salaries, or a slightly smaller one coupled with relief for teachers' health care costs. The Professional Association of Georgia Educators is also lobbying for a "significant" pay raise. The state's teachers had no raise last year and only 2 percent increases were approved in the last legislative session, but those raises were offset by rising health insurance premiums.

HIRE MORE FACULTY: The Professional Association of Georgia Educators is also pushing for funding to provide more school counselors and psychologists and to hire more teachers to help reduce class sizes.

EXPAND PEACHCARE: The state's health care program for low-income children took some hits in recent years as rules were tightened that some recipients lost coverage because of the cost-saving changes. Health care advocates are calling for the reversal of those changes that would make it easier for previous recipients to return or to expand the program to include more than the 220,000 children currently enrolled.

MAKE YOUR VOTERS HAPPY: Extra tax money always increases the urge for politicians to stuff local-assistance projects - so-called pork barrel spending - into the budget, especially in an election year. Senate and House budget writers spent the final days of the last session tussling over about $10 million in projects, some considered to be pork.